Treasury : proposed “to do” list for 2017

| 12-1-2017 | François de Witte |

building At the start of the year, we all look at our “to do” list for 2017. I would suggest for the corporates to focus on following topics:

1. Working capital management:

This will remain a hot topic throughout the year. The priority is to improve the financial structure by optimising the Order to Cash and Purchase to Pay cycle as well as the inventory management. A second priority is to improve the cash flow forecasting, both on the short term, to be able to improve your funding costs or the investment of the excess liquidity, and on the longer term, to improve your financial decisions. I will come back later this year on this topic.

2. Risk Management:

The general expectation is that the markets will remain volatile. In Europe, we have major elections in France, Germany, and the Netherlands. Internationally we also face uncertainties, with the impact of the new national and international policy of President Trump.

Hence, I would recommend to have an increased focus on your interest and forex risk management. You need to ensure more in particular that you have a good overall view on your forex risk, and how to manage it.

3. Technology as an enable for automation and improved controls:

The use of new technologies brings an opportunity to automate manual processes. Several solution providers have come up with smart cloud based solutions. These enable to reduce time consuming manual processes, to reduce errors and to achieve a consistency of approach, as well as greater security compared to manual processes. The increased presence of Fintech providers will enable to put in place customised solution at a lower cost. The upcoming Blockchain technology might also generate new opportunities in this area. For more information on this last point, please see: of Carlo de Meijer.

Focus areas are the automation of the order to cash process (e-invoicing, credit management), of the Purchase to Pay processes (automated match incoming invoices with the purchase orders, etc.), the incoming and outgoing payment processes, and the risk management. Automation can also help to improve the internal controls. It will enable to free time, enabling you to focus on more strategic areas, such as risk management and fraud prevention.

4. Negative interest rates:

If you are in a net debt position, the negative interest rate environment will bring you some tailwind. The opportunity is to use your cash to repay your bank debt.
However, if you are in a net cash position, the situation becomes completely different. You need to look at alternative ways to get a better return on your cash, such as supply chain financing or dynamic discounting. This requires a close alignment with your procurement department.  If your cash position remains structurally high and there are no major investment plans in the future, I would recommend to consider paying out the cash to the shareholders: “Fat capitalisation is not the closes friend of active working capital management”.

5. Fraud & cybersecurity

The only solution for both banks and corporates is to take a holistic approach to fraud as any weakness opens the door for fraud. There are simple ways to reduce this risk by putting in place strong internal controls including the segregation of duties, the dual approval for payment and other transactions, the defined list of beneficiaries and a clear policy in this area.
Durin the last year there have been many cyberattacks in treasury, and hence it is important to put measures in place to minimise the risk of similar attacks on your own business. I recommend an increased focus on computer security (regular security updates, clear policy on downloading programmes, if possible have a separate computer for online payments with special security controls, regular change of passwords).
In addition, it is important to invest in procedures and awareness raising, because cybercriminals and fraudsters almost always exploit human weakness to reach their goals. You need to ensure that the controls are embedded in the organisation

For further information, please see also the publication of Lionel Pavey.

6. Regulatory changes:

 In line with the previous years, regulatory change will continue to be a major hot topic in 2017. The focus areas for 2017 will include the implementation of the PSD2 and the impact of the BEPS project (base erosion and profit shifting) launched by the G2O and OECD. Finance and treasury teams must pay an increased attention in documenting their intercompany agreements and ensuring a market conform pricing.


 While the core priorities of treasurers continue to be on managing cash, liquidity, and risk effectively, they will have to cope an increased volatility of the markets, increased regulations and an increased risk of cyber-attacks. Technology offers opportunities to optimise your treasury management and to address these challenges more efficiently but you need also to ensure that your treasury management and controls are embedded in the organisation. Take at regular intervals time to look ahead and to make sure that you continue to travel in the right direction.


francois-de-witteFrançois de Witte – Senior Consultant at FDW Consult

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